Air/Sea Competition Intensifying

Details

October 29, 1986

The cruise industry is big business for the airlines, and as cruise operators expand into new markets, a growing number of airlines are trying to lure them.

As a result, many airlines now have marketing staffs devoted exclusively to the cruise industry; adjusted flight schedules to accommodate cruise lines; cruise desks at airports in major embarkation cities; and task forces investigating ways to handle anticipated increases in cruise passenger traffic.

The biggest accommodation the airlines have made, however, is in their price structure. Few have raised their rates vis-a-vis the cruise lines in several years - a situation that many say they can no longer afford. Intense competition, however, has made it difficult for them to change the situation.

Florida Markets Most Lucrative

With the decline of the Mediterranean last summer, the primary beneficiaries of the cruise business in 1986 appeared to be the carriers to the Florida markets - particularly Eastern and Delta.

For Eastern, the cruise industry generates more than $250 million annually - or ten times more than it did in 1979, according to William Delahanty, director of national sales. "Back then, there were no special prices or services for the cruise lines," he said. "Now we have three cruise marketing specialists, 11 people at the cruise desk in Miami, and a team of Eastern personnel stationed at the port to help passengers with their luggage."

In addition, Eastern now containerizes much of the cruise lines' luggage, Delahanty said. "Our Friday night flights from the West Coast are comprised 100 percent of cruise passengers, so we put all of the luggage for one line in one container and transfer it directly to the ship," he explained.

Noting the anticipated influx of passengers to Miami, Delahanty said that Eastern already has organized a joint task force with many cruise line operators to study ways to cope with the situation. Eastern, he said, is in good shape, noting that the airline recently moved into a new section of the airport.

Nevertheless, if the cruise industry grows by more than 20 percent in Miami in the next few years, the airlines will not be able to keep up, Delahanty said. "There must be growth in alternative ports."

According to Delahanty, Eastern is watching central Florida carefully. In addition, he said, San Juan is becoming increasingly popular as more repeat cruisers look for a greater variety of itineraries. "There have been some real improvements made down there, but you need a commitment from the major cruise lines to spurn additional business on a year-round basis," he said.

For Delta, the cruise business is a large part of the leisure marketing program, according to Dan Blythe, manager of leisure sales. "We carry more than 250,000 cruise passengers per year - for more than 16 lines - and we expect to see about a 20 percent increase in 1987," he said. Expansion in South Florida and California are expected.

Blythe estimates that Delta carries about 70 percent of the cruise traffic from Fort Lauderdale and Miami. Seattle and New Orleans also are important cruise gateways for the airline.

According to Blythe, Delta is equipped to handle the increased traffic into Miami, but he added, "the airline cannot always shift schedules to accommodate demand."

TWA Feels Effects of Mediterranean Drop-off

TWA saw an important segment of its business drop off this summer, when most of its cruise partners pulled their ships out of the Mediterranean and repositioned them to areas outside the airline's markets, according to a spokeperson there.

However, TWA remains "very involved" domestically, carrying cruise passengers from throughout the United States to Los Angeles, Miami and San Juan. In addition, the airline recently struck a deal with RCCL in conjunction with cruises from New York to Bermuda, the spokesperson reported.

New Domestic Schedules Increase Pan Am's Activity

Last year, Ed Mehler, director of leisure marketing for PanAm, told CIN that air/sea programs were "not a significant source of revenue," because the airline only had feed points from New York and Washington (CIN, 11/6/85). However, now that Pan Am has added flights to Miami from the West Coast and New York, the cruise business has become "very important," he said.

"We are 10 percent over last year," he said, noting that the line carries 25,000 to 30,000 cruise passengers per year. The line's air/sea partners include Carnival, Costa, Cunard, NCL, RCCL, Regency, RVL, and Sea Goddess.

"We expect to do even better in 1987, as more lines return to the Mediterranean," Mehler added. "We are positioned nicely for this resurgency, through our gateways in Nice, Milan, Genoa and Hamburg."

Piedmont is becoming an increasingly significant air/sea partner in Florida, with three hubs (Baltimore, Dayton and Charlotte) offering non-stop service to Miami and Fort Lauderdale. According to Mike Mason, spokesman for the line, Piedmont services more than 40,000 cruise passengers, from over 50 cities, per year. Carnival, Dolphin, Holland America, Premier, and RCCL are among its cruise partners.

Foreign Carriers Also Active

On the West Coast, Mexicana Airlines has been involved in air/sea programs for the past three years, offering one-way air between Mexico and Los Angeles.

According to Robert Crigler, manager of interline sales, the airline carries "several thousand cruise passengers, per year." It currently has a program with Cunard, and worked with HAC until the line repositioned its ship in the Caribbean. Piedmont also had a joint program with Sundance Cruises, and is currently negotiating a deal with the new Admiral Cruises.

To better accommodate the cruise industry, Mexicana increased service out of Los Angeles to Mexico, and initiated non-stop service for HAC. It also established special one-way fares for cruise passengers, Crigley said.

"The cruise business is an important segment, and we are actively recruiting new lines," he added.

This is not the case at BWIA, where they have all the cruise passengers they can handle, according to Ralph Adams, director of Caribbean sales. "If we had more planes, we would be able to offer more air/sea programs, but right now, we are at maximum capacity," he said.

BWIA currently works with Exploration Cruise Lines, Ocean, RCCL and Windjammer from Miami. All of the cruises are from Barbados, except for Ocean, which is out of Antigua, Adams noted.

To expedite traffic flow, the airline has implemented a policy whereby BWIA personnel come aboard the ship prior to arriving in the last port of call to check passengers in, enabling them to proceed right to the gate when they arrive at the airport. For guests staying on for a post-cruise vacation, check-in is taken care of at the hotel the evening prior to departure, Adams explained.

In Vancouver, CP AIR works with Carnival, Costa, Exploration, Hac, and Princess, among others, servicing cruise passengers in the Alaskan market, according to Clare Ash, manager of interline sales. Although Alaska accounts for the majority of the business, CP Air also works with cruise lines in the Orient, Hong Kong and Australia/New Zealand.

Despite the recent growth in Far Eastern cruising, the airline has not seen significant benefits here, Ash reported. "However, we do expect to see expansion in the North and South Pacific."

Mediterranean Carriers Hopeful About 1987

Several European carriers expressed hope that they would have an opportunity to cash in on the cruise business, and are hoping to see cruise operators return to the Mediterranean this summer.

"We have 40 to 50 flights per week from Paris, and now we are just waiting to see what the cruise lines will do," said Bruce Haxthausen, spokesman for Air France.

In the meantime, the line has recently initiated a program with American Hawaii Cruises, offering cruise passengers service to Papette, and also has arranged a special deal with Sun Lines to provide Concorde service to passengers booking cruises to Rio de Janeiro from Miami. In 1987, the airline expects to have a program in conjunction with Wind Song's cruises to Tahiti.

Lufthansa also cooperates extensively with the cruise lines, featuring sailings in its "Holiday Collections" brochure, according to Hans Diessel, marketing manager.

In 1986, the airline featured Costa's Mediterranean cruises, and KD Line's river cruises. In 1987, Lufthansa hopes to add cruises in the Baltic, as well as additional Mediterranean sailings, although nothing has been finalized yet, Diessel said.

Fares at Lowest Possible Rates

Despite the increasing interest in the cruise business, most of the airline executives are concerned that air/sea rates have not increased in several years.

"The cruise lines must recognize that they have to pay a fair price for good service," Delahanty said. "In Eastern's case, fares have continued to go down, while service has been maintained, and the rates are as low as they can get. We cannot continue to donate such large percentages of our seats at uneconomical prices," he added.

At Delta, air/sea rates have been exactly the same for three years, according to Blythe. "We would like to have increases, but for competitive reasons, we have held the line," he said.

The spokesperson at TWA added that, "the cruise business is important to us, but we don't want to give our seats away. It doesn't help us to fill planes just for the sake of filling them up."

Other airline executives said that there needs to be more advanced planning on the part of both industries, noting that better communication about where the cruise lines are positioning their ships, the number of seats they might require, and the flexibility of flight schedules would be useful.

"The key is to work together. There are a lot of berths to fill, and in order for everyone to benefit, we must promote the packages jointly," the spokesperson from TWA said.